Feb 3, 2011 - Suite 500, Madison, WI 53703, call (608) 266-2818, or send e-mail to
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Report 11-3 February 2011
An Evaluation
Wisconsin Veterans Homes Department of Veterans Affairs
2011-2012 Joint Legislative Audit Committee Members Senate Members:
Assembly Members:
Robert Cowles, Co-chairperson Mary Lazich Alberta Darling Kathleen Vinehout Julie Lassa
Samantha Kerkman, Co-chairperson Kevin Petersen Robin Vos Andy Jorgensen Jon Richards
LEGISLATIVE AUDIT BUREAU The Bureau is a nonpartisan legislative service agency responsible for conducting financial and program evaluation audits of state agencies. The Bureau’s purpose is to provide assurance to the Legislature that financial transactions and management decisions are made effectively, efficiently, and in compliance with state law and that state agencies carry out the policies of the Legislature and the Governor. Audit Bureau reports typically contain reviews of financial transactions, analyses of agency performance or public policy issues, conclusions regarding the causes of problems found, and recommendations for improvement. Reports are submitted to the Joint Legislative Audit Committee and made available to other committees of the Legislature and to the public. The Audit Committee may arrange public hearings on the issues identified in a report and may introduce legislation in response to the audit recommendations. However, the findings, conclusions, and recommendations in the report are those of the Legislative Audit Bureau. For more information, write the Bureau at 22 East Mifflin Street, Suite 500, Madison, WI 53703, call (608) 266-2818, or send e-mail to
[email protected]. Electronic copies of current reports are available at www.legis.wisconsin.gov/lab.
State Auditor – Janice Mueller
Audit Prepared by
Paul Stuiber, Deputy State Auditor and Contact Person Joe Fontaine Nathan Heimler Katie Herrem Tom Hinds Tim Reneau-Major Justin Schroeder
Director of Publications – Jeanne Thieme Report Design and Production – Susan Skowronski
CONTENTS Letter of Transmittal
1
Report Highlights
3
Introduction
9
Eligibility, Admissions, and Resident Information Admissions Process Occupancy Trends Resident Demographics and Levels of Care Resident Services Revenues and Expenditures Operating Revenues and Expenditures Administrative Expenditures Capital Project Expenditures Gifts and Bequests Staffing Staffing Levels Staffing Requirements in Skilled Nursing Facilities Meeting Staffing Needs Extra Time Overtime Retention and Recruitment Efforts for Nursing Staff Compliance with State and Federal Nursing Home Regulations Regulation of Skilled Nursing Facilities Regulation of Assisted Living Facilities Responding to Regulatory Citations Aid to Indigent Veterans Program Program Authority and Expenditures Enrollment Trends Eligibility Policies Policy Development Eligibility Assessments
10 11 13 13 17 19 19 24 25 28 31 31 35 36 38 39 42 47 47 51 52 55 55 57 58 58 60
Purchasing and Contracting Goods and Services Purchasing Requirements and Oversight Contract Administration Review of Selected Expenditures Future Considerations Personnel Management Other Financial Management Issues Consolidation of Services Enhancing Oversight and Accountability Appendices Appendix 1—Primary Services Provided by the Wisconsin Veterans Homes Appendix 2—Activities Scheduled for Veterans Home Residents Appendix 3—Debt Service Schedule Appendix 4—Veterans Homes State Purchasing Violations Response From the Department of Veterans Affairs
63 63 64 68 70 71 71 72 74 76
February 9, 2011 Senator Robert Cowles and Representative Samantha Kerkman, Co-chairpersons Joint Legislative Audit Committee State Capitol Madison, Wisconsin 53702 Dear Senator Cowles and Representative Kerkman: We have completed an evaluation of the Wisconsin Veterans Homes, as requested by the Joint Legislative Audit Committee. The homes are administered by the Department of Veterans Affairs (DVA). As of December 2009, they provided skilled nursing or assisted living care to a total of 887 veterans and their spouses. In fiscal year (FY) 2008-09, the homes’ combined expenditures totaled $89.7 million. Operating expenditures increased by 64.2 percent during the five-year period we reviewed, largely because Union Grove opened a new skilled nursing facility in September 2006. We identified significant financial and program management issues at the veterans homes. For example, operating expenditures have exceeded revenues in four of the past five fiscal years, and the homes remain solvent largely because of a one-time Medical Assistance reimbursement rate adjustment of $20.1 million received in FY 2005-06 for care provided at King. Staffing requirements established by state and federal law have been met, but the homes have relied on overtime and limited-term employees to help address long-term staffing needs. Funding for the Aid to Indigent Veterans program, which assists veterans who cannot afford the full cost of assisted living care, has also increased significantly, and the program operates under policies that have frequently changed and are unclear. In a review of 20 participants’ files, we found 4 instances in which eligibility had not been appropriately assessed. The veterans homes purchased $17.0 million in goods and services in FY 2008-09. We found numerous violations of state purchasing requirements in the documentation we reviewed, including noncompliance with prescribed procedures, expenditures made outside of statutory and budgetary authority, and inadequate oversight and monitoring. Turnover in key leadership positions has hampered oversight of veterans homes operations, and because of the homes’ projected operating deficits in FY 2010-11, which we reported in August 2010, continuing legislative oversight will be important. We appreciate the courtesy and cooperation extended to us by DVA in completing this evaluation. DVA’s response follows the appendices. Respectfully submitted,
Janice Mueller State Auditor JM/PS/ss
Report Highlights Operating expenditures have exceeded revenues in four of the past five fiscal years. In FY 2008-09, the homes met nurse staffing requirements established by state and federal law. The number of citations the homes have been issued for violating nursing home regulations is similar to the statewide average. Revisions to existing policies would both clarify and strengthen eligibility requirements for the Aid to Indigent Veterans program. Compliance with state purchasing and contracting requirements should be improved. Inadequate oversight has contributed to significant financial and program management issues.
The Wisconsin Department of Veterans Affairs (DVA) operates the Wisconsin Veterans Home at King, located in Waupaca County, and the Wisconsin Veterans Home at Union Grove, located in Racine County, and provides grants, loans, and a variety of other services to eligible Wisconsin veterans and their families. As of December 2009, the two veterans homes provided long-term care for 887 eligible veterans and their spouses. The skilled nursing facilities at both veterans homes, which offer 24-hour care, are licensed by the Department of Health Services (DHS). Union Grove also operates three assisted living facilities, which provide limited nursing care. DVA currently plans to complete construction of a third, 72-bed nursing home in Chippewa Falls by November 2012. In response to concerns raised by the Board of Veterans Affairs, which oversees DVA and promulgates administrative rules to guide its operations, the Joint Legislative Audit Committee directed us to: review the homes’ admissions policies and the services they offer residents; analyze the homes’ revenues and expenditures; assess staffing levels and compliance with state and federal regulations for nursing staff; review administration of the Aid to Indigent Veterans program, which assists eligible veterans who could not otherwise afford assisted living care;
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4
R EPORT H IGHLIGHTS
examine purchasing procedures; and assess oversight.
Revenues and Expenditures The homes are funded primarily with state and federal Medical Assistance payments, resident fees, federal Medicare payments, and payments to veterans provided by the federal Department of Veterans Affairs. Additional revenue from donors supplements some activities and services. The homes’ combined expenditures increased from $54.6 million in fiscal year (FY) 2004-05 to $89.7 million in FY 2008-09. Combined expenditures have exceeded revenues in four of the past five fiscal years. The homes remain solvent largely because of a one-time payment of $20.1 million in Medical Assistance funds that King received in FY 2005-06 as a reimbursement rate adjustment for care it provided from 2001 through 2005. King maintained yearly surpluses throughout the period we reviewed, but Union Grove had a deficit in each year, which was addressed by the transfer of a total of $21.2 million from King to Union Grove, as shown in Table 1.
Table 1 Transfers from King to Union Grove (in millions)
Fiscal Year
Revenue Transferred
2004-05
$ 5.0
2005-06
4.3
2006-07
5.8
2007-08
3.3
2008-09
2.8
Total
$21.2
The homes had a $9.5 million operating account balance at the end of FY 2008-09; however, that balance will be fully depleted by FY 2013-14 if deficit spending continues at current levels.
R EPORT H IGHLIGHTS
5
Staffing Nursing positions account for more than one-half of all permanent positions at the veterans homes. In FY 2008-09, the homes met nurse staffing requirements established by state and federal law, but they relied on overtime and limited-term employees to help them do so. Spending for extra time worked by part-time nursing staff, for overtime worked by full-time nursing staff, and for additional nursing support by contract nursing staff totaled $3.7 million in FY 2008-09. King has established two stipend programs for nursing staff in training, but the effectiveness of these programs as aids to retention and recruitment cannot readily be determined because of the small number of participants. Only 57 nursing students participated during the five-year period we reviewed, including 10 who did not complete their training or employment requirements.
Nursing Home Regulations The veterans homes are subject to routine, unannounced inspections to evaluate resident services, the physical environment, and residents’ quality of life. Overall, the number of citations the homes received in response to violations of state or federal rules is similar to the statewide average for comparable facilities. From 2005 through 2009, the homes made corrections to address 169 citations for violations of federal nursing home rules and 17 citations for violations of state nursing home rules. Union Grove also corrected eight assisted living facility violations, and its efforts to address two other assisted living violations will be verified by state inspectors during a future inspection.
Aid to Indigent Veterans Program The Aid to Indigent Veterans program provides financial assistance to veterans who cannot afford the full cost of care at Union Grove’s assisted living facilities. In FY 2008-09, the program was funded with general purpose revenue (GPR) and segregated funds from the Veterans Trust Fund. Expenditures were $303,500 in FY 2008-09, and the program served an average of 23 participants per month. Although the program was created in June 2005, DVA did not develop formal policies until May 2008, approximately three years after its inception. Additional modifications are needed to clarify asset and divestment policies.
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R EPORT H IGHLIGHTS
Purchasing and Contracting The veterans homes purchased $17.0 million in goods and services during FY 2008-09. More than one-third of this spending was for medical and other supplies. As shown in Table 2, the veterans homes violated state purchasing requirements for approximately one-third of the transactions we reviewed, or 26 of 79 purchases. Violations included dividing large purchases into separate, smaller purchases that do not require bid solicitation; failing to use required bidding procedures that are intended to encourage competitive prices for higher-cost purchases; making inadequate bid solicitations; and failing to rebid contracts in a timely manner. For example, Union Grove used flawed procurement procedures when selecting a vendor for electrical work that should have been awarded through a formal bidding process. In addition, two vendors were excluded from consideration based on service requirements that were not met by the chosen vendor.
Table 2 Violations of State Purchasing Requirements FY 2008-09 and FY 2009-10 Number of Purchases Reviewed
Percentage with Violations
King
31
12.9%
Union Grove
48
45.8
Total
79
32.9
Future Considerations Ambiguity in DVA policies and inadequate oversight have led to significant financial and program management issues at the veterans homes, including violations of state purchasing requirements and expenditures made outside of statutory and budgetary authority. For example, the Legislature appropriated $50,000 for nursing education at Fox Valley Technical College, which King instead used to make unrestricted donations for the benefit of the school.
R EPORT H IGHLIGHTS
7
In addition, turnover among key leadership positions has hampered oversight of veterans home operations and raised concerns about stability and continuity in agency leadership. DVA has also reported since at least 2006 that it plans to develop a comprehensive long-term financial plan for the veterans homes, but it has not done so to date. The homes would benefit from additional central office oversight in coordinating policies and service delivery.
Recommendations We include recommendations for DVA to: annually analyze overtime costs and the cost of hiring additional nursing staff to meet state and federal nurse staffing requirements, and report to the Joint Legislative Audit Committee by July 1, 2011, on its analysis of FY 2009-10 overtime costs (p. 42); with the Board of Veterans Affairs, determine whether to continue operating two nursing education stipend programs and report to the Joint Legislative Audit Committee by July 1, 2011, on the decision (p. 45); enhance the usefulness of citation reports it prepares for the Board of Veterans Affairs by developing a standard written format (p. 53); report to the Board of Veterans Affairs by July 1, 2011, on the feasibility of Union Grove’s assisted living residents receiving financial support through the Family Care program (p. 57); ensure that each veterans home improves compliance with purchasing requirements, contract monitoring, and invoice review procedures (p. 69); and report to the Joint Legislative Audit Committee by July 1, 2011, on specific steps it has taken to respond to our recommendations to improve financial and program management at the Wisconsin Veterans Homes (p. 77). We also include a recommendation for the Board of Veterans Affairs to: promulgate administrative rules for the Aid to Indigent Veterans program that clearly define asset requirements for resident eligibility, including policies on divestment (p. 62).
Eligibility Admissions and Resident Information Resident Services
Introduction The Wisconsin Veterans Home at King, which opened in 1887, provides nursing care in four skilled nursing facilities with a combined capacity of 721 beds. The Wisconsin Veterans Home at Union Grove, which opened in 2001, operates three assisted living facilities with a combined capacity of 123 beds, as well as a skilled nursing facility that opened 40 beds to prospective residents in September 2006, 40 beds in February 2007, and 40 beds in May 2008. As shown in Table 3, 887 of the homes’ 964 available beds were occupied as of December 31, 2009. In August 2010, we released a letter report that reviewed DVA’s historical rate setting procedures and recommended agency action and legislative oversight to address the homes’ continued solvency. This second phase of our comprehensive evaluation also addresses management and operations issues, including staffing, compliance with state and federal nursing home regulations, the Aid to Indigent Veterans program, and purchasing and contracting for goods and services. In completing it, we reviewed state and federal statutes and regulations pertaining to veterans benefits and nursing homes; interviewed DVA staff, veterans home residents, union officials, and representatives of veterans organizations; analyzed the homes’ revenues, expenditures, and purchasing records; and reviewed reports prepared by DVA.
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I NTRODUCTION
Table 3 Veterans Home Facilities As of December 31, 2009 Residential Hall
Type of Facility
Capacity
Occupancy
Ainsworth Hall1
Skilled Nursing
205
198
MacArthur Hall
Skilled Nursing
116
112
Olson Hall
Skilled Nursing
200
188
Stordock Hall
Skilled Nursing
200
182
721
680
King
Total Union Grove Boland Hall1
Skilled Nursing
120
116
Fairchild Hall1
Assisted Living
40
26
Gates Hall
Assisted Living
42
31
Shemanske Hall
Assisted Living
41
34
243
207
Total 1
Includes areas for residents who require memory care services.
Eligibility, Admissions, and Resident Information Eligibility requirements include Wisconsin residency, care needs the homes are able to provide, and financial disclosure.
Eligibility requirements for admission to the Wisconsin Veterans Homes are established in s. 45.51, Wis. Stats. To qualify for admission, an applicant may be either a wartime or a peacetime veteran and must: be a resident of Wisconsin on the date of admission; be permanently incapacitated from any substantially gainful occupation because of physical disability or age; not have been convicted of a felony or crime of moral turpitude; have care needs that the veterans home is able to provide; and
I NTRODUCTION
11
provide a financial statement, which is used to determine eligibility for the Medical Assistance program and to ensure compliance with s. 45.51(14), Wis. Stats., which requires that assisted living applicants have sufficient income and resources to pay for their care. DVA staff indicated that the requirement to be a resident on the date of admission has been interpreted liberally, in accordance with s. 45.03(14), Wis. Stats, which requires statutes be “construed as liberally as the language permits in favor of applicants.” As a result, DVA has admitted individuals who resided in Wisconsin on the day of application regardless of their residence the prior day. Priority in admissions is given first to veterans, followed by spouses of living veterans, surviving spouses, and parents. Exceptions may be made to prevent the separation of a husband and wife and in cases where there is an immediate need for medical care. Under 38 CFR 52.210(d), at least 75.0 percent of residents must be veterans if the facility was constructed or renovated using federal funds; s. 45.51(3)(b), Wis. Stats., further stipulates that surviving spouses and parents may not be admitted unless overall occupancy is below optimal levels determined by the Board of Veterans Affairs, which the Board has set at 95.0 percent for surviving spouses and 92.0 percent for parents. No parents of veterans resided at the homes from FY 2004-05 through FY 2008-09, the period we reviewed.
Admissions Process Prospective residents are required to document their medical needs, residency, and military service and to provide a financial statement detailing their income sources and assets. Staff at each home review completed applications to determine eligibility. As shown in Table 4, King approved 72.5 percent of its FY 2008-09 applications for nursing home care and denied 5.0 percent, while Union Grove approved 50.3 percent of its applications for nursing home or assisted living care and denied 5.1 percent. The remaining applications were withdrawn by the applicant or placed on hold by the homes pending medical review or additional documentation, or by the applicant for personal or financial reasons.
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I NTRODUCTION
Table 4 Application Status at Veterans Homes FY 2008-09
Category
Number
Percentage of Applications Received
King Approved Denied 1
Withdrawn/On Hold Total Received
187
72.5%
13
5.0
58
22.5
258
100.0%
88
50.3%
9
5.1
78
44.6
175
100.0%
Union Grove Approved Denied 1
Withdrawn/On Hold Total Received 1
Applications that were not approved or denied were withdrawn by the applicant or placed on hold pending medical review, additional documentation, or the applicant’s need to delay admission for personal or financial reasons.
Union Grove does not record the reasons applications were denied, but it retains denial letters in applicant files. King does record this information, and from FY 2004-05 through FY 2008-09 it denied admission to: 68 individuals with care needs for which the home could not provide support; 8 individuals who did not meet eligibility requirements; and 5 individuals who had committed felonies. Section 45.51(2), Wis. Stats., specifies that to be eligible for admission a veteran must have care needs that the veterans home is able to provide within the resources allocated for the care of residents of the veterans home, including chronic alcoholism, drug addiction, psychosis, or active tuberculosis. Staff indicated that King’s resources allow the admission of veterans who have been diagnosed with alcoholism or psychosis if they have maintained sobriety for at least six months and do not pose a danger to themselves or others at the home. This practice is consistent with the conditions of licensure specified in ch. DHS 132, Wis. Adm. Code, which states that persons who require services that a nursing facility does not provide or make available shall not be admitted.
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Occupancy Trends As shown in Table 5, there has been high demand for skilled nursing care at both homes, but the assisted living facilities at Union Grove did not exceed 88.5 percent occupancy during the period we reviewed. All skilled nursing beds at Union Grove were occupied in June 2009, and although King remained near capacity through December of that year, its occupancy has declined slightly over time. Union Grove reported no waiting list for its skilled nursing facility, while King reported a waiting list only for its memory care unit, which in January 2010 included four applicants.
There has been high demand for skilled nursing care at both homes.
Table 5 Capacity and Occupancy at Veterans Homes June 2005 Residents/ Available Occupancy Rate Beds
June 2006 Residents/ Available Beds
Occupancy Rate
688/ 721
95.4%
June 2007 Residents/ Available Beds
Occupancy Rate
June 2008 Residents/ Available Beds
Occupancy Rate
June 2009 Residents/ Available Beds
Occupancy Rate
December 2009 Residents/ Available Occupancy Rate Beds
King1 Skilled Nursing
719/ 721
Union Grove Skilled Nursing
99.7%
N/A2
Assisted Living
86/ 128
67.2 %
N/A2 110/ 128
85.9%
695/ 721
96.4%
688/ 721
95.4%
684/ 721
94.9%
680/ 721
94.3%
48/ 80
60.0%
108/ 120
90.0%
120/ 120
100.0%
116/ 120
96.7%
108/ 128
84.4%
92/ 104 3
88.5%
104/ 123 4
84.6%
91/ 123
74.0%
1
Does not include residents of cottages that are not licensed by DHS and are being phased out by King. In December 2009, there were 2 cottage residents.
2
Union Grove’s skilled nursing facility opened in September 2006, with 40 beds. Additional beds were added in phases: there were 80 available nursing home beds in February 2007, and 120 in May 2008.
3
Capacity was temporarily reduced by 24 beds because of building renovations.
4
The renovations that temporarily reduced capacity in 2008 permanently reduced capacity by five beds when completed.
Resident Demographics and Levels of Care Most of the homes’ residents are white male veterans over the age of 80.
As shown in Table 6 and Table 7, most residents at both veterans homes in December 2009 were white male veterans over the age of 80. Compared to the residents at Union Grove, King’s residents encompassed a broader age range and more numerous counties of last residence. These trends were generally consistent from FY 2004-05 through FY 2008-09, although the ages of veterans in the homes increased slightly.
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I NTRODUCTION
Table 6 Residents of King Veterans Home1 As of December 31, 2009
Gender
Number
Percentage of Total
Last County of Residence
Number
Percentage of Total
Male
515
75.7%
Waupaca
85
12.5%
Female
165
24.3
Milwaukee
50
7.4
Total
680
100.0%
Winnebago
49
7.2
Percentage of Total
Outagamie Brown Portage
47 40 40
6.9 5.9 5.9
Dane
37
5.4
Ethnicity White
Number
98.2%
Waushara
22
3.2
African American
668 5
0.7
Waukesha
21
3.1
American Indian/Alaskan Native
5
0.7
Wood
18
2.6
Asian/Pacific Island
1
0.2
Marathon
16
2.4
Hispanic
1
0.2
Not in Wisconsin3
15
2.2
Total
680
Number
Age
100.0%
Monroe
13
1.9
Percentage of Total
Lincoln Oneida Rock
12 11 11
1.8 1.6 1.6
All Other Counties
193
28.4
Total
680
100.0%
Number
Percentage of Total
Widowed
244
35.9%
9.6
Married
169
24.8
0.3
Divorced
148
21.8
Single
106
15.6
13
1.9
680
100.0%
Number
Percentage of Total 80.4%
30-39
2
40-49 50-59 60-69
3 22 100
0.4 3.2 14.7
70-79
149
21.9
80-89
337
49.6
90-99
65 2
100-109 Total
680
0.3%
100.0%
Marital Status
Separated Conflict2 World War II
Number 269
Percentage of Veterans 49.2%
Total
Veteran Status
Korea
164
30.0
Vietnam
103
18.8
Veteran
547
60
11.0
Spouse
133
19.6
2
0.4
Total
680
100.0%
Operation Desert Shield/Storm
2
0.4
Berlin
2
0.4
Peacetime Afghanistan
1
Includes 680 residents in the skilled nursing facilities and excludes 2 residents in the cottages.
2
Includes 55 veterans who served in more than one conflict.
3
Applicants meet residency eligibility requirements if they reside in Wisconsin on the day of their application.
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I NTRODUCTION
Table 7 Residents of Union Grove Veterans Home1 As of December 31, 2009
Gender Male Female Total
Ethnicity
White African American Total
Number 179
Percentage of Total
Last County of Residence
Number
86.5%
Racine
28
13.5
Milwaukee
22
10.6
207
100.0%
Kenosha
14
6.8
Waukesha
9
4.3
Waupaca
8
3.9
Walworth
5
2.4
2
1.0
2
1.0
12
5.8
207
100.0%
Number
200 7 207
Percentage of Total
96.6% 3.4 100.0%
133
Winnebago 3
Not in Wisconsin
All Other Counties Total
Age
Number
50-59
6
60-69
13
6.3
70-79
36
80-89 90-99 Total
Number
Percentage of Total
2.9% Widowed
93
44.9%
17.4
Married
52
25.1
119
57.5
Divorced
35
16.9
33
15.9
Single
25
12.1
207
100.0%
2
1.0
Separated Total
Number
122
207
100.0%
Percentage of Veterans Veteran Status
World War II
64.2%
Percentage of Total Marital Status
Conflict2
Percentage of Total
Number
Percentage of Total
64.6%
Korea
38
20.1
Veteran
189
91.3%
Vietnam
18
9.5
Spouse
18
8.7
Peacetime
13
6.9
Total
207
100.0%
1
Includes 116 residents in the skilled nursing facility and 91 residents in the assisted living facilities.
2
Includes two veterans who served in more than one conflict.
3
Applicants meet residency eligibility requirements if they reside in Wisconsin on the day of their application.
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Residents of the skilled nursing facilities are assigned levels of care based on their individual needs: residents whose care requires specific, complex interventions are assigned to the intensive skilled nursing level; residents whose care needs are less intensive but who still require continuous nursing care are assigned to the skilled nursing care level; residents needing general or limited nursing care or non-nursing care under nurse supervision are assigned to one of four levels of intermediate care—intermediate, limited, personal, or residential; and residents with terminal illnesses may be assigned to hospice care. As shown in Table 8, as of December 31, 2009, all of Union Grove’s nursing home residents were receiving either intensive skilled nursing or skilled nursing care, while only 77.4 percent of King’s residents received one of these two levels of care. King’s remaining residents were receiving intermediate, limited, personal, or hospice care. Residents of Union Grove’s assisted living facilities are not included in Table 8 because they are not assigned to those levels of care.
Table 8 Levels of Care at the Skilled Nursing Facilities As of December 31, 2009 King Level of Care
Number
Union Grove
Percentage of Total
Intensive Skilled Nursing
35
Skilled Nursing
491
72.3
Intermediate Care
109
16.0
Limited Care
32
4.7
Personal Care
1
0.1
12
1.8
680
100.0%
Hospice Total
5.1%
Number
3 113
Percentage of Total
2.6%
Total Number
38
Percentage of Total
4.8%
97.4
604
75.9
0
0.0
109
13.7
0
0.0
32
4.0
0
0.0
1
0.1
0
0.0
12
1.5
100.0%
796
100.0%
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Resident Services Veterans home residents must be provided certain services under state and federal regulations.
Administrative rules governing nursing homes and assisted living facilities require all such facilities to provide written descriptions of the services included in their daily service rates and those for which there are additional charges. Federal and state regulations also require DVA to offer certain services in order to participate in the Medical Assistance and Medicare programs, to receive per diem payments from the federal Department of Veterans Affairs, and to maintain state licensing. Appendix 1 lists the primary services provided at the skilled nursing and assisted living facilities. While the skilled nursing facilities provide more intensive medical care services, other services such as transportation, housekeeping, food preparation, and dietary planning are available to both nursing home and assisted living residents. State and federal regulations require the homes to provide an ongoing program of activities designed to meet the interests and the physical, mental, psychological, and social well-being of each resident. In December 2009, both King and Union Grove offered residents five or six activities per day, which staff indicated are scheduled to reflect resident interests and needs. Social activities such as “history group,” “coffee and news,” and “armchair travel” were the most frequently scheduled activities at King, and games such as bingo, trivia, and cards were the most frequently scheduled activities at Union Grove. Appendix 2 shows other scheduled activities for veterans home residents.
Residents of both homes receive the same food, prepared and re-heated in an identical manner.
Federal law requires the homes to provide residents with a nourishing, palatable, well-balanced diet. Since February 2006, all meals other than prepared-to-order breakfasts at Union Grove’s assisted living facilities have been prepared and cooked at King and then rapidly chilled to a safe storage temperature. Food for King residents is kept in coolers on-site, while food for Union Grove residents is transported in refrigerated trucks three days each week. Staff at King and Union Grove prepare individual trays either the day a meal is to be served or the day before, and trays are placed in temperature-controlled carts that heat the food before mealtime. All residents therefore receive the same food, prepared and re-heated in an identical manner. Other than diet specifications, menus are identical at both homes, and food is stored for the same length of time. When we interviewed members of three resident councils, many expressed dissatisfaction with the homes’ food preparation method and the taste of food provided. However, a survey of 108 residents conducted in 2008 by a private firm found that those who were satisfied with the homes’ food service outnumbered those who were dissatisfied by nearly two to one. The homes therefore plan to continue using the current cook-chill method for food preparation.
Operating Revenues and Expenditures Administrative Expenditures Capital Project Expenditures Gifts and Bequests
Revenues and Expenditures The veterans homes are supported primarily with state and federal funds, including Medical Assistance payments. Additional revenue is collected from those residents who pay for their own care and through gifts and bequests for purposes specified by donors.
Operating Revenues and Expenditures The veterans homes’ operations are funded primarily with program revenue, which includes: state and federal Medical Assistance payments; payments by some residents at daily private pay rates; federal per diem payments for all residents who are veterans (but not for their spouses); federal Medicare payments; and payments by the federal Department of Veterans Affairs’ Service-Connected Disability Program, which in March 2009 began to fund skilled nursing care for veterans who are disabled by an injury or illness during active military duty.
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E XPENDITURES
King is not currently certified to receive Medicare payments for resident care.
As shown in Table 9, care for most residents has been funded by the Medical Assistance program. However, in December 2009, 9.7 percent of King residents and 25.0 percent of Union Grove skilled nursing facility residents paid for care with their own funds. The Service-Connected Disability Program funded care for a total of 34 residents, and Medicare funded 9 nursing home residents at Union Grove. King is not currently certified to receive Medicare payments for skilled nursing facility care, services, and supplies because a DVA analysis presented to the Board of Veterans Affairs in February 2010 concluded that the projected costs of becoming certified would exceed the projected reimbursements. Assisted living care is not covered under the Medical Assistance, Medicare, or Service-Connected Disability Program.
Table 9 Primary Funding Sources for Skilled Nursing Care1 December 2009 King
Medical Assistance Payments by Residents at Private Pay Rates Federal Service-Connected Disability Program Medicare Total
Union Grove
Residents
Percentage
Residents
Percentage
587
86.3%
71
61.2%
66
9.7
29
25.0
27 02 680
4.0
7
6.0
0.0
9
7.8
100.0%
116
100.0%
1
Excludes federal per diem payments, which are provided for all eligible veterans but not for their spouses.
2
King is not currently certified to receive Medicare payments.
Expenditures have exceeded revenues in four of the past five years.
Each home’s expenditures include staffing costs as well as the costs of supplies and services, utilities, insurance, and fees. As shown in Table 10, the homes’ combined operating expenditures increased from $54.6 million in FY 2004-05 to $89.7 million in FY 2008-09, largely because of the opening of Union Grove’s skilled nursing facility in September 2006. Although expenditures have exceeded revenues in four of the past five years, the homes have remained solvent largely because of carryover funds from a $20.1 million Medical Assistance payment received by King in FY 2005-06 as a one-time reimbursement rate adjustment for the care it provided from 2001 thorough 2005. Those funds have been used to support the homes’ operations in subsequent years.
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Table 10 Combined Operating Revenues and Expenditures FY 2004-05
FY 2005-06
FY 2006-07
FY 2007-08
FY 2008-09
$23,142,900
$46,359,300
$28,544,000
$33,483,300
$34,729,100
Payments by Residents
18,941,000
20,229,500
21,420,500
23,318,800
24,412,800
Federal per Diem Payments for Veterans
12,087,200
14,240,100
15,711,800
17,624,600
18,604,200
127,300
1,716,600
2,207,900
2,893,600
Revenues Medical Assistance
Medicare Federal Service-Connected Disability Program1
– –
Aid to Indigent Veterans Other 2
Revenue Transfers Total
–
–
–
354,300
1,300
89,100
174,900
191,900
303,600
125,500
157,400
159,100
184,300
188,100
(744,400)
(936,400)
53,553,500
(1,164,500)
(1,388,100)
(1,407,800)
80,266,300
66,562,400
75,622,700
80,077,900
Expenditures Salaries
29,170,000
31,859,300
37,495,000
40,885,300
42,973,500
Fringe Benefits
13,715,300
14,655,700
17,006,200
19,957,900
22,686,900
6,068,900
6,753,900
7,722,200
8,168,500
9,394,400
973,800
153,000
1,462,300
422,100
7,050,800
1,954,200
2,530,800
2,386,800
2,782,600
2,809,100
1,906,500
1,460,700
1,677,900
1,858,900
1,761,700
849,700
1,520,900
2,041,600
2,400,400
3,033,300
54,638,400
58,934,300
69,792,000
76,475,700
89,709,700
$(1,084,900)
$21,332,000
$(3,229,600)
$ (853,000)
$(9,631,800)
Supplies and Services 3
Transfers Utilities
Advertising, Postage, and Fees 5
Other Total
Surplus/(Deficit)
4
1
DVA first began receiving payments through this program in March 2009 to fund skilled nursing care for some disabled veterans.
2
DVA records these transfers to the General Fund for certain debt service and capital project costs as revenues on the State’s official accounting records.
3
Includes statutorily required lapses to the State’s General Fund of $810,000 in FY 2004-05 and $81,000 in FY 2005-06, statutorily authorized transfers to the Veterans Trust Fund of $1.1 million in FY 2006-07 and $7.0 million in FY 2008-09, and transfers between DVA accounts.
4
Includes a nursing home bed assessment fee charged by DHS.
5
Includes maintenance, insurance, and staff training.
As shown in Table 11, Union Grove has incurred deficits in each year we reviewed. Although King has maintained annual surpluses, they have declined each year since FY 2005-06.
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Table 11 Surpluses/Deficits at King and Union Grove (in millions)1 Home
FY 2004-05
FY 2005-06
FY 2006-07
FY 2007-08
FY 2008-09
King
$2.4
$24.2
$4.4
$3.4
$1.8
$(0.1)
$(0.5)
$(4.8)
$(2.3)
$(2.2)
Assisted Living
(2.5)
(2.3)
(1.7)
(1.9)
(2.2)
Subtotal
$(2.6)
$(2.8)
$(6.5)
$(4.2)
$(4.4)
Union Grove Nursing
1
Excludes statutorily required lapses to the General Fund of $810,000 in FY 2004-05 and $81,000 in FY 2005-06, as well as statutorily authorized transfers from King to the Veterans Trust Fund of $1.1 million in FY 2006-07 and $7.0 million in FY 2008-09.
In a five-year period, DVA transferred $21.2 million from King to address Union Grove’s deficits.
As shown in Table 12, $21.2 million has been transferred from King to Union Grove since FY 2004-05. These transfers were possible largely because of the $20.1 million one-time Medical Assistance payment King received in FY 2005-06.
Table 12 Transfers from King to Union Grove (in millions)
Fiscal Year
Revenue Transferred
2004-05
$ 5.0
2005-06
4.3
2006-07
5.8
2007-08
3.3
2008-09
2.8
Total
$21.2
DVA believes that recent increases in private pay rates for both skilled nursing and assisted living care residents will help to stabilize Union Grove’s financial condition. However, given the level of annual deficits, it is unclear how assisted living operations can become self-sustaining.
R EVENUES The homes’ $9.5 million operating account balance could be fully depleted by FY 2013-14.
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At present, DVA plans to continue supporting Union Grove’s deficits with the homes’ combined $9.5 million operating account balance, which exists because of the Medical Assistance program rate adjustment reimbursement received in FY 2005-06. However, that balance will be fully depleted by FY 2013-14 if deficits and transfers continue at current levels. In addition, DVA projects that King will begin to operate at a deficit in FY 2010-11. If the combined operating account balance is also used to reduce significant rate increases that have occurred at Union Grove, as some have proposed, that balance will be depleted more rapidly. Our August 2010 letter on rate setting recommended that DVA report to the Joint Legislative Audit Committee on both the current financial status of the veterans homes and management’s plans for achieving the financial solvency required for serving veterans and their spouses effectively over the long term. On January 24, 2011, DVA issued a response that provided little information for legislators and others concerned with the homes’ current financial condition or the likelihood of achieving long-term solvency. For example: The information provided includes a balance sheet, statement of revenues and expenditures, and statement of cash flows, but DVA management provided no narrative analysis or discussion of the significance of this information. The revenues and expenditures of each home were combined in the financial statements DVA provided, when separate reporting is essential for understanding their financial status because funds from King are currently used to support Union Grove’s deficits. DVA cited its strategic plan and a reorganization plan as part of its efforts to achieve financial solvency for the homes, but these documents provide only general information; do not describe specific actions; and do not address important issues raised in our report on rate setting, such as strategies to address declining occupancy rates in Union Grove’s assisted living facilities. DVA indicated that business plans will be prepared for the homes. While such plans could presumably provide additional information and financial projections related to the homes’ longterm solvency, DVA provided no clear time frame for their completion.
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Administrative Expenditures DVA is required to submit monthly and annual reports to the federal Department of Veterans Affairs documenting expenditures related to medical care, administration, and other operations. We used the expenditure categories provided in these reports to analyze trends in administrative expenditures at the veterans homes, which include salaries, fringe benefits, and travel and training costs for approximately 103.9 full-time equivalent (FTE) staff in their admissions, human resources, information technology, and financial services offices and the offices of each Commandant. In addition, as shown in Table 13, approximately 16.2 FTE positions in DVA’s central office are funded by the veterans homes based on estimates of their time spent on veterans homes operations.
Table 13 Administrative Staff Location
FTE Positions
King
79.5
Union Grove Central Office Total 1
24.4 1
16.2 120.1
The veterans homes pay a portion of central office staff administrative costs based on the estimated percentage of time these staff devote to veterans homes operations.
As shown in Table 14, total administrative expenditures increased from $9.4 million in FY 2004-05 to $14.2 million in FY 2008-09. Much of the increase is related to the opening of Union Grove’s skilled nursing facility in September 2006. Administrative expenditures averaged 18.2 percent of operating expenditures from FY 2004-05 through FY 2008-09.
As a percentage of total operating expenditures, the homes’ combined administrative expenditures averaged 18.2 percent from FY 2004-05 through FY 2008-09. As shown in Table 15, they ranged from a low of 17.2 percent in FY 2008-09 to a high of 19.8 percent in FY 2006-07. However, administrative costs for the two homes differed markedly. Union Grove’s administrative expenditures decreased from 44.2 percent of its total expenditures in FY 2004-05 to 25.3 percent in FY 2008-09, while King’s administrative expenditures remained fairly stable during that period and were 13.2 percent of its total expenditures in FY 2008-09.
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Table 14 Administrative Expenditures (in millions) Veterans Homes
Central Office1
Total
Percentage Change
2004-05
$ 8.8
$0.6
$ 9.4
–
2005-06
9.6
0.7
10.3
2006-07
12.8
0.7
13.5
31.1
2007-08
13.3
1.3
14.6
8.1
2008-09
13.2
1.0
14.2
(2.7)
$57.7
$4.3
$62.0
Fiscal Year
Total 1
9.6%
Estimates of central office staff time devoted to veterans homes operations.
Table 15 Administrative Expenditures as a Percentage of Total Operating Expenditures (in millions)
Fiscal Year
Total Operating Expenditures1
Administrative Expenditures
Percentage of Total Operating Expenditures
2004-05
$53.7
$ 9.4
17.5%
2005-06
58.8
10.3
17.5
2006-07
68.3
13.5
19.8
2007-08
76.1
14.6
19.2
2008-09
82.7
14.2
17.2
1
Excludes statutorily required lapses to the General Fund and transfers to the Veterans Trust Fund.
Capital Project Expenditures Capital construction projects are funded primarily through bonding and federal revenue.
The costs of constructing and renovating the veterans homes are typically paid with bonds issued by the State of Wisconsin. Debt service costs are paid either with state program revenue or with GPR. These are not considered operating expenditures and therefore are not shown in Table 10. The federal Department of Veterans Affairs reimburses 65.0 percent of the cost of most construction projects through its State Veterans Home Construction grant program.
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Capital project expenditures at the veterans homes totaled $37.0 million from FY 2004-05 through FY 2008-09.
The homes’ combined capital project expenditures totaled $37.0 million from FY 2004-05 through FY 2008-09, as shown in Table 16. Federal funds paid for 58.4 percent of these expenditures. Debt service costs funded by program revenue totaled $10.1 million.
Table 16 Capital Project Expenditures by Funding Source (in millions) FY 2004-05
FY 2005-06
FY 2006-07
FY 2007-08
FY 2008-09
Total
$ 8.2
$ 9.9
$1.6
$0.1
$1.8
$21.6
Program RevenueSupported Bonding GPR-Supported Bonding
3.4 1.9
5.2 0.3
0.7
